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Wet Seal reports operating income of $10 mn, exceeding guidance
22
May '10
The Wet Seal, Inc., a leading specialty retailer to young women, announced results for its fiscal first quarter ended May 1, 2010, and introduced guidance for the second quarter of fiscal 2010.

For the first quarter:

• Net sales for the first quarter ended May 1, 2010, were $137.8 million compared to net sales of $132.0 million for the first quarter ended May 2, 2009.
• Consolidated comparable store sales increased 2.0%. Comparable store sales for Wet Seal increased 1.5% and for Arden B increased 4.8%.
• Operating income was $10.0 million, or 7.2% of net sales, compared to $5.2 million, or 3.9% of net sales, in the first quarter of fiscal 2009.
• Prior year first quarter stock compensation expense included benefits of approximately $0.9 million, primarily due to higher than previously estimated forfeitures of unvested stock awards resulting from executive and other employee departures from the Company.
• Current year first quarter interest expense included a $2.1 million net non-cash charge to write-off remaining unamortized debt discount and deferred financing costs, and a $0.7 million conversion inducement charge in connection with conversion of the Company's remaining Secured Convertible Notes (the "Notes") and Series C Convertible Preferred Stock (the "Preferred Stock").
• Net income was $3.1 million, or $0.03 per diluted share, as compared to $5.0 million, or $0.05 per diluted share, in the prior year quarter. Excluding the impact of the interest charges noted above, net income for the first quarter of fiscal 2010 would have been $5.9 million, or $0.06 per diluted share. Presented on a fully-taxed basis, similarly to the first quarter fiscal 2010 presentation, first quarter fiscal 2009 earnings would have been approximately $3.1 million, or $0.03 per diluted share (refer to the Income Taxes section herein for further information).
• The first quarter earnings per diluted share, excluding the interest charges noted above, of $0.06 exceeded the high end of the Company's initially announced guidance and equaled the high end of the Company's most recently announced guidance for the quarter.

Ed Thomas, chief executive officer of The Wet Seal, Inc., commented, "We were very pleased with our operating income results for the first quarter. Improved merchandise margin resulting from improved merchandise mix and better planned promotional cadence drove the performance at Wet Seal. Our Arden B division also grew operating profits through continued strong merchandise margin performance and disciplined cost controls."

Mr. Thomas continued, "As of quarter-end, inventory per square foot increased 4.5% versus the prior year quarter, with Wet Seal up 3.2% and Arden B up 13.9%. We continue to carefully build inventory levels, particularly at Arden B, to support expected sales growth going forward."

The Company generated cash flows from operations of $14.0 million during the 13 weeks ended May 1, 2010, and ended the quarter with $170 million of cash and cash equivalents and no long-term debt.


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